[image: Oil | ProPakistani]
Saudi Arabia is contemplating pricing some of its oil sales in yuan *—* amove that will undermine the US dollar’s supremacy in the global petroleummarket and represent another turn by the world’s top crude exporter towardAsia.
Its talks with China over yuan-priced oil contracts have been on and offfor the better part of six years but recently picked up pace as the Saudishave grown increasingly dissatisfied with the decades-old US securityguarantees, according to the Wall Street Journal.
The Saudis are enraged by America’s lack of backing for their engagement inYemen’s civil war as well as the Biden administration’s attempt to reach anagreement with Iran over its nuclear program.
It is no secret that China already purchases more than 25 percent of SaudiArabia’s oil exports, and it would be a significant move by the kingdom toprice even some of its exports of roughly 6.2 million barrels of petroleumper day in anything other than the US dollar if priced in yuan.
The vast majority of global oil sales — roughly 80 percent — are indollars, and the Saudis have only traded in dollars since 1974 when theystruck a deal with the Nixon administration, that included securityguarantees. China had introduced yuan-priced oil contracts in 2018 as partof its efforts to make its currency tradeable globally, but they have noteroded the dollar’s dominance in the oil market.
Conversely, the United States is one of the world’s leading oil producers.According to the US Energy Information Administration, it formerly importedtwo million barrels of Saudi crude per day in the early 1990s but thefigure dropped to less than 500,000 barrels per day in the month that endedon 31 December 2021.
On the other hand, China’s oil imports have increased in tandem with thecountry’s growing economy during the last three decades. According toChinese data, Saudi Arabia was China’s main crude supplier in 2021,supplying 1.76 million barrels per day, followed by Russia at 1.6 millionbarrels per day.
In light of these details, some experts argue that contracting oil sales ina less stable currency like the yuan may jeopardize Saudi Arabia’sbudgetary position. The impact on the Saudi economy would most likely bedetermined by the amount of oil sold and its principle price in the market.
On the contrary, another pool of prominent economists suggests that movingaway from dollar-denominated oil sales would diversify the kingdom’srevenue base and might eventually lead to the Saudi Riyal (SAR) beingpegged to a basket of currencies, similar to how Kuwait did it.